Libya to remove oil and food subsidies
Oil minister Al Arusi has announced that they will be joining the campaign against the sensitive fuel market reforms and will also be scrubbing off oil subsidies, which take more than 10% of the budget, before the end of 2016.
The decision to remove fuel subsidies on all types of fuel is blamed on smuggling and will be extended to food subsidies. The minister believes that subsidies have only led to the increased smuggling of fuel. The International Monetary Fund (IMF) estimated that more than 14% of the Libyan budget, around $7 billion allocated for subsidies, is not aimed at those who are in need of it. Minister Arusi thinks that the low price of fuel in Libya has made it vulnerable to smugglers who have turned it into a luxurious trade. He said that the removal of the subsidies will bring the price to the same level as its neighbors and stop the smugglers from crossing borders for its cheap fuel.
With a population of around 6 million, Libya’s fuel subsidies are dwarfed by those of larger nations on an absolute basis. The country is also not under the same pressure as neighboring Egypt or Tunisia, which are both fighting political unrest to undertake painful economic reforms to secure loans from the IMF. Egypt tried a similar decision but it was welcomed by a violent reaction. The Libyan government is planning to embark on a 3 year awareness campaign to psychologically prepare its citizens and avoid such scenarios.
The country however remains to be marked by political tensions between the government and armed militias who continue to patrol the streets. The militias didn’t hesitate to lay siege on government buildings in order to see their demands met last week.